Question

1. Why, in your opinion, is senior management so concerned about the “high” inventory levels at Champion Electric?
2. What would you suggest to Barb as steps to take in addressing the concerns of President Campos?
Champion Electric has made a decision to be a full service supplier with high customer service. This means that they will have a lot of SKUs and perhaps more inventory than their competition in order that customer service is as high as possible.
Management was upset with Bob about customer service, the number of people working in this area, and more recently, with the overall level of inventory. A few points to make about the case in general are:
1. New Products: When a new product is added, an attempt to buy an “economical" quantity is made without knowing much about demand.
2. The overall level of inventory is high yet customers complain about stockouts. Although the case suggests that there is some type of ABC analysis taking place (“We always have the high volume, more profitable items in stock”), they may need to revisit the criteria being used for that classification.
3. “Sometimes our system even shows we should have stock but we don't.”
The company needs to work on inventory accuracy. Cycle counting and other methods for improving accuracy can be discussed.